The group, which is 73 per cent owned by the taxpayer, posted a loss of £2bn, although this is down on the £3.5bn deficit it reported a year earlier.
The company’s bonus pool was cut by 11 per cent to £373m for 2015, while chief executive Ross McEwan said he will not take a £1m “role-based” incentive, which is paid on top of salaries by some banks.
Mr McEwan also added that in 2016 he will give half of his role-based pay to charity in a bid to defuse what has become an annual pay row at the taxpayer-backed lender.
It will be the third year in a row that the New Zealander, whose base salary is a £1m a year, will have voluntarily forfeited part of his pay package.
The losses at RBS come after it said last month it would set aside billions to cover past mistakes as part of a raft of mammoth financial provisions.
The bank said it has set aside £3.6bn in conduct charges. This includes £2.1bn to cover expected legal action on US residential mortgage-backed securities, as well as £600m extra for payment protection insurance (PPI) mis-selling compensation.
Chief executive Ross McEwan is attempting to turn around the lender so the Government can shed more of the 73 per cent stake it still owns after bailing it out at the height of the financial crisis.
Mr McEwan said: “RBS made progress again in 2015. We ended the year a simpler, stronger bank with a business anchored squarely in the UK and Ireland, focused on retail and commercial markets.
“Year one of our plan in 2014 was about getting cost out and improving our capital position. This gave us the platform to go further, faster in 2015 by exiting more businesses that didn’t fit our strategy, and accelerating improvements in our core bank. We delivered on both.”
He added: “The UK government’s decision to start disposing of its majority stake in RBS during 2015 was a significant step forward, and underlined the progress we have made over the last two years.”
On a visit to Yorkshire, earlier this month, Mr McEwan claimed that many of his banking rivals were still “playing the old game” and putting profits ahead of customers.